What are top upgrades for buy-and-hold rental property?

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What are top upgrades for buy-and-hold rental property?

Greg Pond
Real Estate Broker · Denver, CO · Member since 2016 · 36 posts · 14 votes

Curious to hear what the BP community thinks about some of the top upgrades for buy-and-hold rental property. We own a property management and real estate brokerage firm in Denver, Colorado that serves real estate investors. We are writing a new article to share with our clients about some of the top upgrades for their rental property portfolio. I am working on a plan for each of our clients over the next 10-years, so they can budget for some of the upgrades. Most of the properties we manage are in neighborhoods that achieve rents from $2000 to $5000+.

I also have a single-family investment property that is approaching 20-years old and will need some love soon. We have done some work to it by investing in a new roof, exterior paint, flooring throughout, and new appliances. Curious to hear what everyone thinks about future updates over the next 5-years. The rent is $2650 and in a strong Denver neighborhood that continues to see rent appreciation. The homes have above average finishes in most of the rentals in the area (i.e. granite countertops versus laminate, hardwood versus carpet). My thought is start with some inexpensive items, such as: master bath and kitchen light fixtures, ceiling fans, and landscaping. Looking forward to hearing your ideas.

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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y

In my properties, the best upgrades have been:

1. All floors into either hardwood (if existing) or luxury vinyl plank (totally waterproof). Removing all carpeting and cheap sawdust-based laminate.

2. Making sure all properties have what I consider common amenities. As an example, I am shocked at the number of flippers around here who won't spend a couple more bucks and put a dishwasher in an old kitchen. It kills their resale.

3. Upgrading property status when possible. Going from 2/1 to 2/2 or 3/1, or from 3/1 to 3/2 has been huge for us. 

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    • Cameron TopePro Member
      Property Manager · Katy, TX · Member since 2015 · 1k+ posts · 1k+ votes
      6y

      Greg,

      We operate predominately in the Greater Houston market. Our property values range from $60,000 to $500,000, with the majority falling between $150,000-$250,000. 

      The biggest value adds we have completed (either for our own or clients properties) are LVT/LVP floors, stainless steel appliances, granite countertops and tile bathrooms. 

      Interested to hear what others say!

      [email protected]832-770-7090
      5Reply
    • JD MartinBusiness Member
      Moderator
      Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
      6y

      In my properties, the best upgrades have been:

      1. All floors into either hardwood (if existing) or luxury vinyl plank (totally waterproof). Removing all carpeting and cheap sawdust-based laminate.

      2. Making sure all properties have what I consider common amenities. As an example, I am shocked at the number of flippers around here who won't spend a couple more bucks and put a dishwasher in an old kitchen. It kills their resale.

      3. Upgrading property status when possible. Going from 2/1 to 2/2 or 3/1, or from 3/1 to 3/2 has been huge for us. 

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      • Adam Martin
        Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
        6y

        Outside of the basics that have been covered like floors and paint I think I get the most value from a fence. I target renters that have dogs, if you have a no pet policy I would skip a fence, but it really seems to attract tenants.  I have a dog and don't want to have to let him out in the cold and snow and neither do tenants.  I tried going cheap on one and didn't get a lot of interest however once I put in the add I was having a fence added I got a lot more messages.  I have found in my area allowing dogs helps rent the property faster, for more money base plus pet rent.  

        5Reply
      • Bennie Leija
        Developer · Houston area · Member since 2020 · 57 posts · 26 votes
        6y

        @Greg Pond - I install a open concept living area. Spouses  (man/woman) like to be involved in discussions while still in being in the kitchen. 
        I also provide a outdoor kitchen/grill/fireplace.
        Many people love to be outside with children as they are cooking outside and this brings in the family or friends closer. “Family Value“ I call it.

        Thanks,

        -Bennie 

        1Reply
      • Bjorn AhlbladPro Member
        Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
        6y

        Don't forget about the outside, paint main entry, garage doors, point masonry etc, landscape, paint and carpet common areas-halls-laundry, does not need to be expensive but first impressions count, like when they first drive up to the building or complex.

        2Reply
      • Michael Robbins
        Property Manager · Henderson, NV · Member since 2018 · 501 posts · 317 votes
        6y

        First I ensure that the property is well maintained so that it is safe, clean, and operable.  The first upgrade I always look at first is interior painting.  Second, stainless steel appliances and new washer/dryer.  And third, new floorings.

        1Reply
      • Stevan T.
        Chicago, IL · Member since 2015 · 9 posts · 0 votes
        6y

        @JD Martin hello! How much does it’s usually run you to add a bathroom?

        0Reply
      • JD MartinBusiness Member
        Moderator
        Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
        6y
        Originally posted by @Stevan T.:

        @JD Martin hello! How much does it’s usually run you to add a bathroom?

         Assuming that the basic infrastructure is already in place, meaning I don't have to add on to the house, I can get in and out for less than $10k including adding/moving plumbing. That's everything - floors, vanity, tub, toilet, fixtures, paint, drywall/hardiboard, etc. I've done a couple that were under $5k. This is with tiled tub & shower, not insert. I could probably cut a grand if I did insert instead but I prefer tile. 

        These days I'm doing less of my own work. If I do everything - and I can do everything, including electrical and plumbing - I can add a full bath for under $2k. But I'm getting too old and too fat to be crawling around in crawlspaces these days :)

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      • JD MartinBusiness Member
        Moderator
        Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
        6y
        Originally posted by @Adam Martin:

        Outside of the basics that have been covered like floors and paint I think I get the most value from a fence. I target renters that have dogs, if you have a no pet policy I would skip a fence, but it really seems to attract tenants.  I have a dog and don't want to have to let him out in the cold and snow and neither do tenants.  I tried going cheap on one and didn't get a lot of interest however once I put in the add I was having a fence added I got a lot more messages.  I have found in my area allowing dogs helps rent the property faster, for more money base plus pet rent.  

         That's a good point, I completely forgot about the outside. I like to add decks, fences, paved driveways, and fire pit if allowed/appropriate. Driveways and fences are expensive but add some value to the house. Decks are my biggest bang for the buck outside, as the material isn't that expensive and I can build a standard lumber dimension deck in a day (8x12, 10x12, 12x16). 

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      • Debbie C.
        Member since 2019 · 118 posts · 74 votes
        6y

        Hi Greg

        Most of what I add inside has been covered already granite counters etc.

        In one of our rentals we had a open dining room off the living room. We wanted more flexibility, so we partially enclosed and added large double doors. When open you have a large space that flows thru, when closed you have privacy and a flex space to be used however the tenant wishes.

        Our current tenant uses it for office space, he works at home a few days a week. More people may be working at home now, but this could also continue, so space for an office could be a plus.

        1Reply
      • JJ P.
        Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes
        6y

        We're usually on a budget but we paint it, refloor it, and get rid of old light fixtures.  If you have old, dated bathroom vanities or sinks/tubs, redo them also.  

        0Reply
      • James Carlson
        Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
        6y

        @Greg Pond

        Throwing out the obvious non-sexy repairs -- roof, sewer, etc. -- that nonetheless matter a lot, I'd say there are four big renovations that bring a nice return on investment for properties in Denver and Colorado Springs.

        1. A moderate kitchen update. Nothing crazy. Granite countertops, stainless steel appliances, more modern-looking cabinetry. 
        2. A moderate bathroom update. Again, don't go luxury with this. Just bring it up to the contemporary style.
        3. Finished basement. This might be more true for resale value. You can finish a basement for $25/sf. As an example, I just looked at some homes in a newer development on the east side of Colorado Springs. Most had 750sf basements, some finished, some unfinished. The finished basement homes seemed to get about $30k more. If you finished it for $20k (roughly 750sf at $25/sf), then that's a $10k return.
        4. Outdoor space. Again, don't go crazy. But a xeriscaped yard with a seating area is a huge bonus in Colorado where the weather is amazing.

        I'm interested to hear what others think. 

        4Reply
      • Daniel Haberkost
        Rental Property Investor · Colorado Springs, CO · Member since 2018 · 682 posts · 729 votes
        6y
        Originally posted by @Greg Pond:

        Curious to hear what the BP community thinks about some of the top upgrades for buy-and-hold rental property. We own a property management and real estate brokerage firm in Denver, Colorado that serves real estate investors. We are writing a new article to share with our clients about some of the top upgrades for their rental property portfolio. I am working on a plan for each of our clients over the next 10-years, so they can budget for some of the upgrades. Most of the properties we manage are in neighborhoods that achieve rents from $2000 to $5000+.

        I also have a single-family investment property that is approaching 20-years old and will need some love soon. We have done some work to it by investing in a new roof, exterior paint, flooring throughout, and new appliances. Curious to hear what everyone thinks about future updates over the next 5-years. The rent is $2650 and in a strong Denver neighborhood that continues to see rent appreciation. The homes have above average finishes in most of the rentals in the area (i.e. granite countertops versus laminate, hardwood versus carpet). My thought is start with some inexpensive items, such as: master bath and kitchen light fixtures, ceiling fans, and landscaping. Looking forward to hearing your ideas.

         Just to throw an idea out there that's a little outside the box, I've had a lot of intrigue from adding smart home features. Ring doorbell, Nest Thermostat, (I forget the brand but) smart wall plugs/light switches got A LOT of attention in our latest rental and cost very little. Got the idea from a friend of mine and he has several of his renters to paying $75 more a month in exchange for having smart homes features installed. 

        3Reply
      • Ramon Alire
        New to Real Estate · Denver, CO · Member since 2019 · 30 posts · 7 votes
        6y

        I have rented for several years before buying my first home and the one thing I hated most was not having enough storage space. I have knowingly chosen several dwellings based on the amount of storage. Any size garage, a large shed or lean-to is money. I have even utilized a moderately sized crawl space to store the x-mas tree and accompanying holiday boxes. My current residence (a live-in rehab and hold) just had a detached 2 car garage erected in the back last month. I feel it's a huge addition to the ARV and future rents. I have also noticed in this particular neighborhood that the homes with garages and sheds are tidier. No storage leads to a lot of outdoor clutter i.e. bikes, BBQs, Lawn maintenance equipment etc. Neat yards increase curb appeal dramatically. In my opinion that is. Much love BP. This is my favorite place.

        2Reply
      • Luke Marsh
        Property Manager · Cincinnati, OH · Member since 2019 · 131 posts · 237 votes
        6y

        For me I think it is really 4 main areas. 

        1. Finished Basement

        2. Updated Floors (LVT Or LVP)

        3. Wash/Dryer Units

        4. Stainless Steel Appliances

        5Reply
      • Jason Smith
        Weatherford, TX · Member since 2017 · 63 posts · 43 votes
        6y

        I would always lean towards kitchen and bathroom upgrades for 2 reasons. They add the most recoverable equity (80-90% of that invested) and those are the areas that people tend to want the best in.

        I upgrade all of my homes with granite countertops and new appliances in the kitchen and came up with a cookie cutter look for my baths years ago (time to update with the trends). This helps me get my homes rented fast and aids in retention of my tenants. I also get top of the market rents too btw.

        2Reply
      • Craig CurelopBusiness Member
        Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
        6y

        @Greg Pond - This might just be one of the most valuable posts on BiggerPockets. I love this! 

        I think the biggest things have been hit. However, I think some repairs increase rent while others increase property value. Here are my thoughts on each: 

        Rent Increases:

        1. Finishing a basement/adding bedrooms
        2. Kitchen Update (cabinets, countertops, appliances)
        3. Bathroom update (tiled bathrooms) 

        Price Increases: 

        1. Large, obvious, big-ticket items such as the roof, water heater, furnace, plumbing, electrical, AC, etc. 
        2. Finished basement/adding bedrooms or square footage
        3. Kitchen Update (cabinets, countertops, appliances
        4. Bathroom update (tiled bathrooms)
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      • Adam D Rinehart
        Investor · Houston · Member since 2019 · 153 posts · 139 votes
        6y

        Many of the old houses (1920's - 1950's) I've rehabbed in Houston have window units and just look bad. I've found that replacing those with ductless mini-split units has been a great way to go. They are much cheaper than a central unit and still allow for zoned climate control.

        4Reply
      • Steve Morris
        Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
        6y

        "Curious to hear what the BP community thinks about some of the top upgrades for buy-and-hold rental property. "

        In OR in terms of rent adder:

        1) Extra FULL bath = $30/month

        2) Split heat pumps w A/C = $40-$50/month.  Tenants get A/C and lower electrical bills, especially winter.  Owner gets dehumidifier and less moisture - Win-WIn if you can get past the $5K cost

        3) Washer/Dryer = $50/month.  However, if you are NOT billing for water use, you may lose $30/month since tenant's friends may use the W/D

        4) Locked garage = $100/month.  Bigger (for storage) = better.

        5) Nicer appliances = $0/month but you can rent quicker

        6) Nicer landscaping = negative $/month.  You can rent quicker, but the more you put in landscape the more it costs to maintain.

        2Reply
      • Mark Sewell
        Investor · Houston, TX · Member since 2017 · 1k+ posts · 871 votes
        6y
        Originally posted by @Adam D Rinehart:

        Many of the old houses (1920's - 1950's) I've rehabbed in Houston have window units and just look bad. I've found that replacing those with ductless mini-split units has been a great way to go. They are much cheaper than a central unit and still allow for zoned climate control.

        Never thought of this.  Good stuff here.

        0Reply
      • Josh Bakhshi
        Real Estate Agent · Atlanta, GA · Member since 2015 · 359 posts · 158 votes
        6y

        I see a lot of great posts.  JD I love the idea of going from 2/1 to 3/1 or 2/2.  I commend everyone and learned a couple things.  THANKS!

        But we should go back to Greg's situation.  This is a rental in a pretty strong market.  Things he does today probably wouldn't bring much appreciation in 5-10 years.  He is also getting 2650/month.  In most of my markets, that is a very good rate.  So I think there is strong rent demand regardless of any improvements.  Lastly, he fixes things as needed like the roof.  So he is not a slum-lord.

        My advise to you is look at what your competition is offering and consider the return on investment.  Don't forget that this is a business.  Also, I would limit improvements to things that help the well-being of the property (investment).  Things like LVP or adding a 1/2 bath would get my vote.

        Good luck.

        3Reply
      • James Carlson
        Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
        6y

        Uh, folks, we're missing the obvious renovation ... in-bedroom sauna. Super expensive, total space waster, rarely used, and difficult to maintain. No-brainer!

        I kid, but I seriously have a friend who installed a tiny little sauna in her 1br condo and loved it. Ridiculous!

        0Reply
      • James Carlson
        Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
        6y

        @Josh Bakhshi

        Best advice yet! Renovations done today ain't doing squat for your resale value 10 years from now. Because any "cool" updates you do now will by then be "like, soooo 2020."

        That's $2,650 sounds pretty good, but you've got to look at whatever Denver neighborhood he's in. If you're Golden Triangle or Cherry Creek or LoDo, average rents are all in the $2,000s. 

        I think in the end, it's simple math. Review comps in your Denver area. Are some getting meaningfully more rent? If so, what's different about them? Kitchens? Bathrooms? In-ground pool in the bedroom? Whatever it is, price it out and see if what you spend will be made up plus some in rents during the time you plan to own it. 

        Great thread.

        1Reply
      • Marian Smith
        Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
        6y

        @Greg Pond Both tenants and landlords want durable, low maintenance finish outs in light neutral colors and not too much solid white to keep clean. Paint is on trend tones and floors are Ideally vinyl planks in a distressed wood look with grays, browns and beige to hide dirt/damage and go with everything. I upgrade old recessed lights with LED kits. Add a second clothes rod to closets if there is only one. And a rod to the laundry room if possible. I think if I were to upgrade a rental to granite I would go with black. Avocado green, pinky beige, yellowy almond, tuscan gold, gray. or white quartz.

        2Reply
      • Matt W.
        Rental Property Investor · Member since 2018 · 157 posts · 83 votes
        6y

        Just because I haven't seen it and I do it as an upgrade for a property management company that does STR at the beach, I'll say changing fluorescent bulbs to LEDs.

        No buzzing or flickering. They turn on instantly and there is no ballast to fail. Plus they’re more energy efficient and less calls about lights burnt out.

        0Reply
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